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YouTube’s 16 million Visitors Ripe for Advertising Revenues

The social networking phenomenon on the web shows no signs of abating. YouTube has just broken into comScore’s Media Metrix Top 50list for most visited sites in the US. YouTube had 16 million unique visitors in July 2006, up 20% on June and a far cry from the 58,000 early adopters who hit the site in August 2005. If the minutes of viewing were aggrated, it would be in the top 5 terrestrial TV channels in the USA. These figures really seek to underline the massive growth in social networking and self-expression sites which enable users to exchange personal videos and pics (as well as illegal pirated content).

Yesterday, YouTube also announced its first steps into the advertising arena with a Paris Hilton channel dedicated to promoting the singer’s new album. At the time of writing this, 125,000 people had already viewed the new channel. To date, YouTube has been remarkably low-key with advertising — a few Google ads are about the only thing I have ever come across. But with spiralling bandwidth and development costs and the prospects of a juicy IPO or acquisition, the company is keen to grow its revenue streams.

YouTube, MySpace, Flickr and the other high-profile social networking sites are just the tip of the iceberg. It seems there are sites for every social community.

Advertising appears to be the best means to support these sites and some of the content provided within them. But to date, web-based advertising has shown that Telcos need not be a part of the mix (beyond carrying the bits and bytes). On the web, the destination site (e.g. social networking or search engine) manages the relationship between user, content and advertiser. Operators can insert themselves into this relationship in their own walled gardens - Orange World, Vodafone Live! and T-Mobile’s T-Zones for example (although even this has proved tricky). It is, however, much more difficult for them to carve out a niche when users are free to roam the web from their mobile device — the Telco 2.0 world.

It seems that Telco’s have an opportunity to play in this space and potentially leverage some of their (unique-ish) assets:

  1. Authentication, authorisation, and accounting controls - who the customer is, what service they are buying, how to bill them. Useful not just for delivering and billing for services but also for tracking advertising effectiveness.
  2. Identity. Operators can federate the existing phone number system with the Internet services, preventing users creating multiple identities where this is undesirable.
  3. Customer relationship Management - a history of customer preferences and usage, for more contextual advertising. By having geographic, demographic and preference data, the telco is in a better position than other players to insert the right ads from a selection offered by a partner like Google.
  4. PSTN integration - for things like click-to-call. For stimulating core services and faciliating consumer response to advertising.

The question is can operators come up with a valuable and sustainable business model for advertising-funded content in the Telco 2.0 world before the opportunity disappears? Current platform plans appear long on real-time session control, and short on access to the other customer data and billing assets.

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